Amazon rebounds 1% after worst losing streak since 2006

Shares of Amazon ended Tuesday’s session more than 1% higher, breaking a nine-day losing run that had wiped out billions of dollars in market value.Between February 2 and last Friday, the stock had fallen about 18%, its steepest slump since 2006, eroding over $450 billion in market capitalisation as investors scrutinised the company’s aggressive artificial intelligence spending plans.

The pressure intensified after Amazon’s fourth-quarter earnings release earlier this month.
The company guided for nearly $200 billion in capital expenditure this year, up almost 60% from the previous year and more than $50 billion above Street estimates.A major portion of this outlay is earmarked for AI, which demands substantial investment in data centres, specialised chips and networking infrastructure.

The scale of spending has heightened concerns that heavy AI investments could compress or even eliminate free cash flow for major technology firms.
Combined capital expenditure by Alphabet, Microsoft, Meta and Amazon could approach $700 billion this year as the companies accelerate infrastructure buildouts.On Tuesday, shares of Alphabet and Microsoft each fell more than 1%, marking their fifth consecutive day of declines, while Meta slipped marginally.

Amazon CEO Andy Jassy defended the elevated spending during a post-earnings call, saying he is confident the investments will generate strong returns on capital over time.

Matt Garman, who heads Amazon Web Services, also underscored the rationale in a recent interview with CNBC, arguing that the additional capex positions AWS to capture expanding AI demand in cloud computing.

Analysts at Wedbush Securities said in a note following the results that Amazon has entered a “prove it” phase, where investors will be looking for clear evidence that the stepped-up spending can translate into measurable returns.

They cautioned that the higher investment outlook may weigh on sentiment until tangible benefits become visible, though the firm maintains an outperform rating on the stock.

Meanwhile, Andrew Boone, managing director and research analyst at Citizens, said he remains constructive on AWS despite the recent pullback.

Speaking on CNBC’s “The Exchange,” Boone referred to Jassy’s projection that Amazon plans to double its data centre capacity by 2027, calling it an underappreciated catalyst that could drive faster revenue growth for the cloud division as new capacity comes online.